Stock Prices
To streamline the trading process, the securities industry has adopted the convention that stock prices are to trade in eighths of a point. For stocks, each point is $1, and each eighth is $1 divided by 8, or 12.5 cents. The stock prices are quoted as 1/8, 1/4, 3/8, 1/2, 5/8, 3/4 and 7/8.
- For example, a stock is currently trading for $20 per share and it starts to rise. It may trade at 20 1/8, 20 1/4, 20 3/8 ,20 1/2, 20 5/8,20 3/4, 20 7/8 and 21. If the stock is rising quickly, it may bypass certain of these multiples., rising from $20 to 20 3/8 in one trade.
While a stock can move by more than an eighth of a point, it cannot move by less than an eighth. For example, if you want to buy a stock that is selling for $20 a share, you can buy it for $19.875 or $19 7/8. However, you cannot bid $19.95. The only exception are stocks that are traded for less than $2 per share, which usually traded with the minimum price increments of sixteenth of a point.
| Stock Main Page | Table of Contents | Corporate Finance Course |